Japan’s stock market has rebounded from last week’s sell-off and investment firm Bernstein sees promise looking ahead, recommending a specific trading strategy and naming overweight-rated stocks. Japan’s broad-based Topix index plunged 12.23% on Aug. 5 and the benchmark Nikkei 225 index fell 12.4% — its worst decline since 1987′s “Black Monday.” Both indexes have since recouped some losses, with the Topix and Nikkei ending 2.83% and 3.45% higher respectively on Tuesday. Referencing past crises, analyst Rupal Agarwal noted that the “near-term market bottom might be in; and the recent dovish comment from BOJ [Bank of Japan] is likely to stall the forced carry winds.” “The sharp correction, has given long-term investors a great opportunity to add back Japan as the structural story was never broken. However, given the broader macro and political uncertainty, rising equity risk-premium and moderating earnings revision trends, we expect markets to remain volatile,” she added in an Aug. 8 research note. Below are four stocks from the investment bank’s defensive screen, listed on the Tokyo Stock Exchange. They also trade as American Depository Receipts in the U.S. All stand out for having substantial upside potential, according to FactSet’s consensus price targets. Stocks trading at a ‘deep discount’ Among the names on the bank’s screen is video games company Nintendo . It made headlines after revenue and profit for the first fiscal quarter plunged as sales of its aging Switch console declined. Nintendo’s shares tanked following the announcement, but remain up 5.3% year-to-date. According to FactSet data, of 25 analysts covering the stock, 14 give it a buy or overweight rating, eight have a hold rating, while three have an underweight or sell call. The average target price on the stock is 7,750 Japanese Yen ($52.5), giving it around 19% upside. Other companies that turned up on the screen include video gaming player Capcom , electronics manufacturer Keyence Corp and entertainment company Bandai Namco Holdings . According to FactSet, analysts on average give Capcom over 19% upside, Keyence almost 24% upside and Bandai Namco 22.5% upside potential. — CNBC’s Michael Bloom, Charmaine Jacob and Arjun Kharpal contributed to this report.
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